Shipbuilders Complain About S. Korean Shipbuilding Aid

Tuesday, October 24, 2000

European shipbuilders recently complained to the European Union over South Korean state aid to its shipbuilders, opening the way for a possible EU case against Seoul at the World Trade Organization (WTO), Reuters reported. The Committee of EU Shipbuilders' Associations (CESA) said it had filed a complaint with the European Commission under the EU's Trade Barriers Regulation over alleged trade distortions in global shipbuilding caused by South Korean aid to its industry. "We are complaining about the state aid that Korean companies are receiving," Reinhard Lueken, the head of CESA's Brussels office. He said there were a number of bankrupt shipyards in Korea still offering prices which did not cover their costs. "By doing so they have a very harmful effect for the European industry," he said.
The EU has repeatedly accused South Korea of setting unfairly low prices for shipbuilding, undercutting European yards. The EU and South Korea hammered out an agreement in April aimed at stabilizing the world shipbuilding market, which the EU says suffers from overcapacity and steadily falling prices. But the EU has accused South Korea of not fully implementing the agreement. When further talks broke down in September, the EU said it could launch a WTO dispute against South Korean shipbuilding practices. But, it said it would first have to receive a complaint from European shipbuilders before it could do so.
European Commission spokesman Anthony Gooch said that the Commission had received the CESA complaint and had 45 days to examine it. If the Commission decided the complaint was valid, it would launch its own investigation under the Trade Barriers Regulation. The Commission would then have five months to investigate, including on-the-spot enquiries in South Korea. On the basis of its probe, the EU would then have the option to file a case under the WTO's dispute settlement procedures, he said.
Gooch said EU Trade Commissioner Pascal Lamy had set a deadline of the end of October to try to make progress with South Korea based on the April agreement. "We have given the Koreans a lot of time and we have given them leeway to see if we couldn't find an amicable solution and it appears that it is beyond reach. So we have to set the wheels in motion," he said.
If it went to the Geneva-based WTO, the EU would first demand consultations with South Korea and, if that failed, could ask for a dispute settlement panel to arbitrate. The EU and South Korea began talks last December on shipbuilding after the Commission accused South Korea of using International Monetary Fund aid received after the 1997 Asian financial crisis and other subsidies to undercut European shipbuilders. South Korea denied the charge.